The issuance of FERC and PHMSA's Memorandum of Understanding (MOU) last month potentially signals an improved review and authorization process for Liquefied Natural Gas (LNG) projects, but only time will tell how the MOU will work in practice and if it will achieve its stated goal of increasing efficiency and effectiveness of the application review process in a manner that will "reduce expenses for LNG project applicants . . . and the U.S. taxpayer." Perhaps as an indication of things to come in the FERC/PHMSA partnership under the MOU, FERC issued environmental schedules for twelve pending LNG projects on the very day that the MOU was issued that, according to the Commission, reflect FERC's "efforts in recent months to streamline its review process for LNG project applications," including by entering the MOU with PHMSA.
As previously reported, the MOU was entered pursuant to the "One Federal Decision" framework established under directives contained in Executive Orders issued earlier this year with the intent of providing a more predictable, transparent and timely federal review and authorization process for delivering major infrastructure projects. Improvements in this process are particularly important for LNG projects, which are subject to myriad complex regulatory requirements and require authorizations from multiple oversight agencies.
FERC reviews and approves the siting, construction, expansion and operation of LNG terminals under section 3 of the Natural Gas Act (NGA), and it issues certificates of public convenience and necessity for LNG and other facilities used for the interstate sale and transportation of natural gas under NGA section 7. The NGA also designates FERC as the lead agency for compliance with the environmental review procedures mandated by the National Environmental Policy Act (NEPA) for LNG facilities subject to its jurisdiction. Under the federal Pipeline Safety Act (PSA), PHMSA has exclusive authority to establish and enforce safety regulations for onshore LNG facilities. PHMSA regulations at 49 C.F.R. Part 193, Subpart B contain detailed siting requirements for LNG facilities, relying heavily upon the incorporation by reference of safety standards established by the National Fire Protection Association (NFPA). Part 193, Subpart B requires the calculation of both a "dispersion exclusion zone" and a "thermal exclusion zone" for LNG containers and transfer systems in accordance with models prescribed by various industry standards incorporated into the PHMSA regulations by reference. See 49 C.F.R. §§ 193.2057; 193.2059.
FERC has historically conditioned its approval of new LNG facilities upon compliance with PHMSA's safety requirements in Part 193 (requiring, for example, evidence of a project's ability to legally control activities in offsite exclusion zones, as mandated under PHMSA's regulations, as a condition of certificate authorization). While FERC is deferential to PHMSA determinations of Part 193 compliance, obtaining concurrence on such compliance has not previously been subject to a specified deadline.
The MOU provides for PHMSA to issue a "Letter of Determination" to FERC as the authoritative determination of compliance with Part 193, Subpart B "no later than 30 days prior to the estimated issuance date of FERC's final NEPA document" (unless PHMSA notifies FERC that it will not be able to meet this timeframe, explaining the reasons for the delay and setting a new date for compliance). The MOU also provides that the agencies will assist one another in inspection and enforcement activities by sharing information, including inspection findings, and that each will "keep the other informed of newly discovered or emerging safety issues or concerns." In the MOU, the agencies commit to sharing or providing access to information and data submitted by LNG facility applicants or operators. The MOU leaves in place the 2004 Interagency Agreement between FERC, PHMSA and the US Coast Guard, which also provides for coordination and information-sharing among the signatory agencies with respect to the oversight of waterfront LNG facilities.
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